Meeting changing consumer needs in the US retail pharmacy landscape is crucial for pharmacies to stay competitive in an environment characterized by saturated retail locations, labor shortages, inflationary pressure, and a leveling-off of generic drug penetration. To gain insight into these changing consumer preferences, McKinsey conducted a consumer survey of over 1,000 people in the United States.

Ben H.

Ben H.

Aug 11, 20233 min read

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Meeting changing consumer needs in the US retail pharmacy landscape is crucial for pharmacies to stay competitive in an environment characterized by saturated retail locations, labor shortages, inflationary pressure, and a leveling-off of generic drug penetration. To gain insight into these changing consumer preferences, McKinsey conducted a consumer survey of over 1,000 people in the United States.

Over the past two decades, the retail pharmacy landscape has evolved significantly, with four types of retail pharmacies emerging: retail chains, regional pharmacies (mass retail and grocers), independent pharmacies, and mail-order and online pharmacies. Retail chains, being the largest and most prevalent, represent a third of stores and about a third of prescription revenues in 2021. They dispense approximately 138,000 prescriptions annually per store, which is about 50 percent more than grocers, the next largest prescription dispensers per retail location.

Mail-order and online pharmacies, on the other hand, have lower overall penetration for nonspecialty drugs compared to specialty drugs. Although they accounted for less than 10 percent of total US prescriptions in 2021, they are gaining traction. In the past 15 years, direct-to-consumer online pharmacies, unaffiliated with pharmacy benefit managers (PBMs), have been established and have received significant funding. Traditional players like retail chains have also embraced omnichannel options, offering physical, online, and mail-order services.

For online pharmacies looking to disrupt the market, it is essential to reinforce their natural benefits of speed and convenience and cater to convenience seekers. However, they should also bridge the potential gaps in consumer experience caused by their lower-touch approach. One approach could be to create a more personalized experience by incorporating video telehealth visits with remote pharmacists to establish a personal connection and complement the convenience factor.

In addition to the challenges faced by the evolving retail pharmacy landscape, healthcare organizations in general are at risk of credit downgrades and defaults. Moody's reports that 25 North American entities in the hospital, pharmaceutical, medical device, and healthcare services sectors have been downgraded to B3 or lower this year, indicating a material deterioration in the sector's credit quality. Factors contributing to this risk include high costs in an inflationary economic environment, legislation such as the No Surprises Act, and opioids-related litigation.

To navigate these challenges and meet changing consumer needs effectively, here are three actionable pieces of advice for retail pharmacies:

  • 1. Embrace technology and omnichannel options: Retail chains and online pharmacies should invest in technology to enhance their services and provide convenience to consumers. This could include implementing online prescription ordering, same-day delivery, and mobile apps for prescription fulfillment. By offering a seamless omnichannel experience, pharmacies can cater to the preferences of different consumer segments.
  • 2. Prioritize personalized experiences: While online pharmacies offer convenience, they should also focus on creating a personalized experience for consumers. Incorporating video telehealth visits with remote pharmacists can help establish a personal connection and address the potential gaps in consumer experience caused by the absence of face-to-face consultations. By understanding their target demographic and reinforcing their natural benefits, online pharmacies can differentiate themselves and build customer loyalty.
  • 3. Adapt to regulatory changes and economic factors: Healthcare organizations, including pharmacies, need to stay informed and adapt to regulatory changes and economic factors that may impact their operations. Legislation like the No Surprises Act and ongoing opioids-related litigation can create financial risks for pharmacies. By staying proactive and implementing strategies to mitigate these risks, such as optimizing pricing and managing inventory effectively, pharmacies can navigate these challenges and maintain their financial stability.

In conclusion, meeting changing consumer needs in the US retail pharmacy landscape is crucial for pharmacies to thrive in a competitive environment. By embracing technology, prioritizing personalized experiences, and adapting to regulatory changes and economic factors, retail pharmacies can position themselves for success. It is essential for pharmacies to understand their target demographic, cater to their preferences, and continuously innovate to stay ahead in an evolving industry.

Resource:

  1. "Meeting changing consumer needs: The US retail pharmacy of the future", https://www.mckinsey.com/industries/healthcare/our-insights/meeting-changing-consumer-needs-the-us-retail-pharmacy-of-the-future (Glasp)
  2. "More healthcare organizations at risk of credit default, Moody's says", https://www.modernhealthcare.com/finance/moodys-more-healthcare-organizations-risk-credit-downgrades (Glasp)

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